In January 2018, my portfolio hit a new all-time high. The next time I would hit an all-time high was in November of 2020. 1051 days of living in a draw-down is a pain. What was more painful than enduring the draw-down was the changes I made.
As a systematic investor, my system gave me a list of stocks from my PF to sell and buy an alternative set of stocks. While the portfolio consists of 30 stocks, I sold 220 stocks in the same period and bought 220 different stocks. Almost no repeats.
What if I had not done this and instead stuck to the Portfolio I held in January 2018. How would this be looking in November 2020?
My Portfolio would have been down 50% instead of being back to square one.
After 4 glorious years of barely interrupted bull run, the markets are experiencing an experience with gravity like it hasn’t done in a recent time. My portfolio hit an all-time high in September last year. In terms of the length, it’s still a baby compared to the last time around.
This correction is already proving to be different from the one I experienced last time around. While I had just one instance of a four percent drawdown in a single day between 2018 and March 2020 and just one more before the portfolio made a new all-time high, this time around, this time around I have had two.
In the back-test I have done, the longest period of drawdown was of 1960 calendar days. Jan 2008 to May 2013 to be precise. Being a full-time participant during those times, the despair has to be seen to be believed. The last time one saw such despair was during the dot com bust.
Every such fall has removed from the marketplace quite a few well-endowed investors just to be replaced by equally well-endowed new investors. Lots of stocks which were supposedly the best investments prior to the crash were nowhere to be found by the time the market had recovered. Some like DLF while not haven’t conquered their high of 2008 are still around, others like Unitech disappeared
When death comes to companies, what is uniform is the fact that majority if not all of the equity in the company is held by individual investors. When Naren made the most controversial statement one has seen in recent times, one word caught my attention. His reference to OTCEI.
If one pools a random set of 100 investors today, I wonder if even one had heard about OTCEI. OTCEI, the acronym for Over-the-Counter Stock Exchange of India was set up with the purpose of providing small companies an ability to raise funds without having to bother with the compliance requirements of large exchanges. Sounds familiar?
Every few years, the market teaches everyone some old lessons that get forgotten in the heat of a bull market. Every bull market has bottomed out with Nifty being way lower than its 1000 day moving average. Currently that stands around 19,600. Question is how deep this shall be and how long the next recovery. Only the prepared survive.
